- The Essential Military-to-Civilian Transition Resource

Money Smarts: Laying the Financial Groundwork for a Civilian Transition
by Carolyn Heinze, Contributing Editor

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For most people, leaving the military marks the end of an era.  You have finished your service, encountered many challenges and triumphs along the way, and your time in the organization has come to a close. While transitioning out of the military signifies a conclusion, it is also a new beginning.  In order to start civilian life off on the right foot, it is necessary to think about the financial impact that a civilian transition will have on you and your loved ones.

Joseph Montanaro, certified financial planner at USAA in San Antonio, Texas, advises those transitioning out of the military to plan their civilian transition as they would a military operation. “You really need to go about this with the same amount of discipline,” he said. In addition to providing advice from financial planners like Montanaro, who field questions via e-mail and telephone, USAA offers guidance and checklists on what items transitioning military personnel should be attending to in the name of financial security at its Financial Service Center and Web site.

The HSBC and the University of Maryland also offer financial tips for military personnel through the North America Military Financial Education Center at The site covers subjects such as credit, debt, insurance, retirement planning and general financial planning.

Loretta Abrams, senior vice president of consumer affairs at HSBC North America in Prospect Heights, Ill., notes that once out, ex-military personnel should ensure that their FICO score – the credit rating by which lenders judge your current standing and ability to pay your bills – is accurate. “Coming out of the military, one of the first things you’d want to do is review that credit report and correct any errors,” she said. “Because they may have moved around and been deployed in different areas, errors can occur, or there could be bills showing as unpaid and they thought that they paid them. There is a higher propensity for people who relocate often to have errors on their credit score.” She adds that in today’s economic climate, any score under 700 is not good enough to obtain credit.

Once you have verified that your FICO records are accurate, Abrams suggests that those people who may be settling in a new town establish a relationship with a local bank. “Open a savings account, open a checking account or set up a college fund for your children,” she advised. “Be picky and make sure that you are saving in fees, and that you are opening the accounts and have the relationships that align with your needs and the way you view banking.”

While in the military, you receive a number of benefits that may or may not be available once you are back in civilian life. Health insurance is at the top of the list.  Not only must you alter your coverage while you are conducting your job search, but there is no guarantee that your new employer will cover you once you are hired. Retirement planning is another biggie, Montanaro points out: “In the civilian world, there are fewer and fewer companies that offer any sort of pension like the military offers,” he said. “Now, all of a sudden, you have to understand the alphabet soup of retirement plans that are out there that you need to understand and take advantage of.”

Another common issue relates to the Service Members Group Life Insurance (SGLI). “For a lot of folks, the $400,000 life insurance provided through that program may be all that they need,” Montanaro said, acknowledging, however, that this depends on the individual. “When they get out, there’s a limited window where they can transfer to a fairly expensive Veterans’ Group Life Insurance without any underwriting or checking of their health.” Before leaving the military, it’s a good idea to examine what private insurance you’re eligible for, and if it’s possible to purchase a similar policy at the same price as an SGLI. “If they don’t check beforehand, they will never know what’s going to crop up in the medical testing.”

Because expenses are likely to increase once you are out of the military, it is necessary to start saving before you leave so that you are financially stable throughout your civilian job search. Montanaro suggests that while in the service, members set up a ‘transition fund’ that will cover living expenses for three to six months.

Devising realistic budgets requires one to consider all of the line items for which they were not financially responsible while in the military, such as housing and insurance. “When they make the transition, they have to consider ‘the civilian job is going to pay me X number of dollars more than I was making in the military,’ but they don’t consider that they had a housing allowance in the military,” Montanaro illustrated. “Or, they had health insurance that they didn’t have to pay for, and that will cost several hundreds of dollars a month. It’s a matter of putting pen to paper, or calling up an Excel spreadsheet and taking a look at reality.”

Abrams suggests that when budgeting, people should not be concerned with just their immediate financial needs, but that they should also consider their mid-term and long-term goals, such as home ownership or paying for a child’s education. “All of that needs to be included in this process, and it should be updated at least once a year.”


Carolyn Heinze ( is a freelance writer/editor.

Return to February 2009 Issue